A look at the day ahead in US and global markets from Mike DolanThank you for reading this post, don't forget to subscribe!
At least one of the so-called “Magnificent 7” of the top US megacaps was able to ride to the rescue.
After a tough week for the markets, Amazon’s impressive results came after the bell on Thursday following news of a “not too hot or cold” combination of a pick-up in US growth and a drop in inflation in the September quarter – both reports US strength. Underlines the consumer.
Shares of online retail giant Amazon climbed 5% after hours, in response to similarly good results from some of its Big Tech peers this week. The company said its cloud growth has stabilized and its fourth-quarter guidance is in line with forecasts.
And both Nasdaq and S&P500 futures were poised to surge over the weekend after cash markets closed at their lowest levels since May.
Relief is welcome. As the forgettable October comes to an end on Monday, the S&P500 is set to see its third consecutive month of losses for the first time since the pandemic hit — only the second string of such monthly losses in seven years.
The biggest driver of that pullback has been rising long-term borrowing costs.
Confirmation that US GDP growth more than doubled during the third quarter to a two-year high of 4.9% partly explains why the Treasury market has been running on fear for several weeks – fear. That the sheer force of the expansion will keep the Federal Reserve from cutting rates for at least a year.
US nominal growth is running close to 8% depending on which inflation gauge you use, an impressive summer. US nominal growth during the quarter was more than double that of China.
But with 10-year Treasury yields at least partly priced in near 5%, bond markets took a cue from a contraction in the core PCE inflation reading in Thursday’s GDP report – which showed a slower-than-expected slowdown of 2.4%. Used to be. month. And even the rosy headline GDP growth rate was well below many of the 5% print assumptions.
The result was a 15 basis point peak-to-trough daily retreat of the 10-year yield – which has since stabilized around 4.85% overnight after September’s monthly PCE reading on Friday and ahead of next week’s Fed policy meeting.
That bond relief may have dampened the stock surge overnight – although overall earnings season is also looking pretty good. More than 80% of companies have taken a hit so far and S&P500 companies are planning annual profit growth of 2.6% for Q3 and nearly 12% earnings expansion for 2024.
The report led to Big Oil replacing Big Tech at the top of Friday’s corporate diary with recently acquired Exxon Mobil and Chevron. America’s most valuable company Apple will shut down next week.
Elsewhere, global stocks captured by MSCI’s all-country index also jumped from their lowest levels since March.
Chinese shares rose in a fourth session after data showed industrial companies’ profits rose in September, while policy measures aimed at stabilizing the battered economy helped investor sentiment.
Geopolitical concerns eased after China’s top diplomat Wang Yi said on Thursday the United States and China needed “in-depth” and “comprehensive” dialogue to reduce misunderstandings and stabilize bilateral relations.
But the market will remain cautious of weekend developments in the region until Friday due to the war in the Middle East – with tensions escalating to US activation in Syria overnight.
Crude oil prices were modestly higher and the dollar retreated from week’s highs, having slipped below the 150 yen level on Thursday, although no Bank of Japan intervention appeared as many had feared.
In Europe, the European Central Bank held the line on interest rates on Thursday but left its balance sheet runoff plans unchanged – a piece of comfort for those expecting a rapid drain on its bond holdings.
European stock indices were soft on Friday, with France’s blue-chip index lagging behind its peers after drugmaker Sanofi’s poor forecast sent its shares falling 15%.
Britain’s NatWest fell more than 10% on the back of a downgrade in its profit outlook and news that the Financial Conduct Authority is investigating the lender’s handling of the former Brexit Party leader’s accounts.
Key developments that will provide further direction to US markets later on Friday:
* US September personal income/consumption and PCE inflation gauges, Dallas September Fed PCE estimates, last October. University of Michigan Reading Consumer Survey
* US corporate earnings: Exxon Mobil, Chevron, AbbVie, Colgate-Palmolive, Trove Price, Aon, Xcel Energy, Stanley Black & Decker, CBRE, LyondellBasell, Charter Communications, Phillips 66
* European Central Bank President Christine Lagarde attends EU summit in Brussels
(By Mike Dolan, Editing by Jane Merriman [email protected]. Twitter: @reutersMikeD)